Measuring nonprofit success requires analyzing many metrics

February 5, 2014

Measuring nonprofit success requires analyzing many metrics

While all companies measure success in multiple ways, profits tend to be the determining factor. Most of the actions of a for-profit company are carried out to make more money. Improving customer satisfaction and creating innovative new products lead to greater profits – they are tools for success. The nice thing about measuring success with dollars and cents is it provides a set of numbers that can be used as metrics.

For nonprofit organizations, success or failure is far more subjective. While profits are obviously not the measure of success, the need to keep the organization viable is still a determining factor. Serving the designated community or industry cannot be done without successful funding. For this reason, it is very important that nonprofits set clear goals when determining what constitutes acceptable service in their area.

How to measure success when profit isn't applicable
Success and failure should be measured by looking at the organization as a whole. When analyzing metrics, look to see how they compliment one another:

• Fundraising goals: A viable nonprofit sets very specific fundraising goals at the beginning of the year. The goals are based on realistic estimates of what the organizations can bring in and how much money is needed to function and grow. Even if fundraising came up a little short, consider it a success if you were still able to meet demand for service.
• Charity provided: For nonprofits that provide services to the less fortunate, it can be difficult to determine if the job is getting done. Should a food shelter wipe out world hunger, or merely provide a low-cost option for families that are experiencing a rough time financially? Like fundraising goals, service goals should be realistic.
• Growth: An increase in size is not always a measure of success for a nonprofit. If current levels of service are adequate, nonprofits shouldn't feel compelled to spend money. Shore up reserves for when times are lean or begin saving for needed costs down the road, such as a new building or equipment.

Each year, how a nonprofit measures success will depend on the goals of board members and employees. The balance sheet alone cannot determine if an organization was an asset to the community that it serves. Success can be measured in many ways, only individuals within the organization can determine if their nonprofit is operating to the best of its ability.